More EPCRS/DOL Settlement
February 23, 2007
Earlier this week I noted that we have had three EPCRS-related posts this week. Well, why stop at three. This article discusses resolving ESOP operational mistakes.
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In a February 8, 2007 DOL press release, the DOL announced a settlement with an accounting firm over a deficient ESOP audit. The CPA firm must pay the ESOP $5,000 in restitution and ensure all audit personnel posses the appropriate knowledge and training. According to the press release:
“The order resolves a lawsuit alleging that the CPA firm knowingly participated in fiduciary breaches under the Employee Retirement Income Security Act (ERISA). The CPA firm was alleged to have knowingly participated in breaches by the plan committee members and others when the firm failed to disclose in its audit report that the plan was not receiving employer contributions needed to make loan payments on RCI stock purchased by the plan.”
In addition, according to a March 14, 2006 DOL press release, the DOL also sued the fiduciaries:
“The U.S. Department of Labor has sued the fiduciaries of Rehab Consultants Inc. (RCI), Jefferson, Georgia, for making improper loan payments from the company’s employee stock ownership plan (ESOP) to parent company Rehab Consultants of Florida (RCF) and then abandoning the plan…
According to the lawsuit, filed in federal district court in Atlanta, Georgia, plan committee members -- Joseph Gentzel, Mary Ann Gentzel, Grayson Gentzel, Jennifer Heidt Gentzel, and Graeme Gentzel -- violated the Employee Retirement Income Security Act (ERISA) by allowing the plan to engage in a prohibited transaction. Loan payments of more than $170,000 were paid from the plan to RCF. In June 2001, RCI was dissolved and the plan committee members resigned without providing for continued management of the plan
The value of the stock purchased by the ESOP, which the Labor Department alleges the defendants abandoned, declined from $19.74 per share in 1996 to $.79 per share in 1998 and is currently worthless….
The suit seeks a court order requiring the defendants to restore to the plan all losses with interest. The suit also asks the court to permanently bar the defendants from serving in a fiduciary capacity to any plan governed by ERISA and to appoint an independent fiduciary to manage, terminate and distribute plan assets to eligible participants.”